Strengths of the Chinese Retail Market
Sainsbury’s is a multinational retail based organization which operates in the United Kingdom. The organization has its origins in London and was founded in the year 1869 by James Sainsbury. Sainsbury’s has become the second largest retailer in the self-service retail industry of United Kingdom. The revenues generated by Sainsbury’s in the year 2017 has amounted to 26.224 billion Euros. The company offers a wide range of retail products which include, fresh fruits, vegetables and other daily use based products as well.
Sainsbury’s has formed an e-commerce website named Sainsbury’s Online. The customers are now able to order the products from Sainsbury’s with the help of the online website of the company. The organization was able to a huge share of the UK retail market and acquired second position in the industry (Sainsburys.co.uk. 2018).
The analysis in the essay will be based on the situational analysis of the expansion related plans of Sainsbury’s in a new market area. The behaviour of the consumers of the new market area towards the products manufactured by Sainsbury’s will be discussed in the essay. The expansion related plans of Sainsbury’s based on the opportunities provided to the company by the retail market of China is basis of this analysis.
1.Micro situational analysis of Sainsbury’s in China
Strengths of the Chinese retail market – The trends in the economic globalization have been able to strengthen the retail market if China. The foreign retailers are entering the Chinese market on a continuous basis. The presence of the huge foreign retailers has been able to generate advanced ideas related to management and methods related to management. On the other hand, the big retail organizations have further affected the retail enterprises who are making plans to enter the market. The entry of Walmart in the Chinese was another major boost that was provided to its operations (Tsang and Yamanoi 2016). The retail industry of China has been hugely influenced by the foreign retailers based on five different aspects which include, operations, diversification, logistics, modern management and organization. The recent foreign retail boom has been able to make rapid developments in the retail industry of China. The departmental stores in China were being constructed faster as compared to the previous situation that was prevalent in the Chinese market. The annual sales of the various shopping malls have also increased in the process. The business of departmental stores has improved a lot due to the recent entry of various foreign retail organizations in the market (Iyer et al. 2015). The small convenience stores have also started developing in China and this also proved to a welcome change in the Chinese retail industry. The development of globalization and changes in world economy have affected the Chines retail organizations and increased the entry foreign retailers. The retail market of the country has developed with the help of the changing technologies, the increasing strength of marketing network, the changes in technology and the increase of capital strength. The levels of consumer demands and diversification of the retail services have placed high demands on the services provided in the retail industry of China. The speed of operations in the retail industry have increased in the Chinese retail industry. The chain supermarkets of the country are developing constantly and this has been able to attract the foreign retailers to operate in this industry. The scope of retail business in the country has increased and the organization are able to operate in the country in a centralised manner (Papadopoulos, Gulanowski and Plante 2018).
Weaknesses of Chinese Retail Industry
Weaknesses of Chinese retail industry – The Chinese retail industry has seen huge developments in the recent times. However, there are still many issues that can affect the entry of foreign retail organizations like, Sainsbury’s. The results of various researches in the Chinese retail market have been negative for the physical or the brick-and-mortar stores of various organizations in the market. The sales of the domestic retailers have fallen by 1.9% which has represented a slowdown if 2.6% as compared to the year 2015. The shopping related preferences of the Chinese consumers have changed and the sentiments of the consumers have affected the sales of various retail stores in the country (Denicolai et al. 2016). The rapid changes in the shopping formats of the consumers have further led to high levels of competition among the organizations which are already operating in the Chinese retail industry. The shoppers are favouring online shopping much more as compared to shopping in the physical stores. The growth of 10.4% in the retail sales has been mainly based on the online revenues that are earned by the organizations. Sainsbury’s therefore needs to enter the retail market by planning its physical and online operations simultaneously so that it can capture the customers from both areas (Yoder, Visich and Rustambekov 2016).
Opportunities in the Chinese retail market – The opportunities for a huge retail organization like Sainsbury’s high in China. The economy of the country has shown huge growth in the last few years. This has attracted the foreign investors to enter the country and start their business operations in a successful manner. The foreign retailers are flooding in the country and retail scene of China is much more diverse in nature as compared to the previous situation. The new retail revolution is being led by China which marks the merger of the online and offline operations of various organizations. The high usage of technology by the consumers is the major reason behind the implementation of the concept of new retail (Mohr and Batsakis 2018). The online channels are not used for sales and they are utilised by the organizations to connect with the consumers and understand their demands. Sainsbury’s can take advantage of this situation to enter the Chinese market and increase the footfalls of consumers in its stores.
Weaknesses in Chinese retail market – The main issues that act as weaknesses for the operations of the retail industry in China are the lack of local characteristics, the low rates of the self-brand chain, the backward logistics management and the backward management of business operations. The high levels of competition in the retail industry of China due to the fall that has been detected in the sales of the retail organizations is a major weakness. The retailers are under huge pressure to gain a competitive position in the market by making significant changes in their product mixes. Sainsbury’s will thereby face huge competition from the domestic retailers of China to gain a share in the retail market of the country (Lynch and Jin 2016).
Opportunities in the Chinese Retail Market
Macro situational analysis of Sainsbury’s in China
The political factors of China affect the operations of the retail industry to a large extent. The regulations related to trade is strict in China as retail is not considered to be a prestigious industry in the country. The modernization of local markets is another political factor affects the operations of various retail industries in the country. The closed international market of China has been changed in the modern business environment to an open economy. The entry of Sainsbury’s in the market will be thereby facilitated by the open market economy of China (Hao and Friar 2017).
The economic factors of China that affect the entry and operations of various organizations are mainly related to growth that has been detected in the GDP of the country. The tax rates in China are around 25% and special rates are provided to organizations making investments in certain sectors. The companies like Sainsbury’s entering the Chinese market need to find and associate themselves with the local suppliers.
The social conditions of China and the growth in population will help in increasing the revenues and profitability of the foreign organizations entering the market. The health related concerns of the Chinese consumers will affect the products that are offered by Sainsbury’s in the market (Christian, Zhang and Salifou 2016).
The technological factors of the country have shown changes and improvements which have affected the distribution and production related activities of the organizations. The suppliers who have high levels of IT capabilities affect the operating processes of foreign organizations in the country.
The environmental factors are based on the waste and recycling activities that are conducted by the organizations in the Chinese industry. Sainsbury’s thereby needs to take care of this factor before starting operations (Khojastehpour 2015).
The legal factors in China are based on the strict regulations that are framed by the government to control the operations of the foreign based companies. The control of monopoly is a step that is taken by the Chinese government.
Product – Sainsbury’s offers a wide range of products to the customers under the current product strategy related to marketing mix. The organization has focussed on the management of quality and innovation and has developed new products to enhance the existing range of products. The organization mainly operates according to two formats which are local convenience stores and supermarkets which offer 30,000 lines of products. 20% of the total number of products offered by Sainsbury’s belong to their own brands (Weaver et al. 2014). The various product ranges of the company include the following,
Weaknesses in Chinese Retail Market
The “Taste the difference” range of products contain the premium quality products which include bakery and ready-to-eat products. The organic range of the company includes, the food products which are grown in an organic manner and provide natural flavours to the consumers. The “Be Good to Yourself” which consists of the different food items which belong to the low fat category of products. The “FreeFrom” range contains products for the consumers who are allergic to gluten, dairy or wheat related products. The “Home Collection” range includes products that are used in the kitchen. Lastly, the “By Sainsbury’s” range includes the products which are not a part of the various product ranges that are described earlier (Bannà and Trento 2016). Sainsbury’s can offer the various range of products that are already being offered to the consumers in the United Kingdom. The changes can be made in the organic product range to offer local products to the consumers of the country. The usage of biodegradable and the environment-friendly packaging also needs to be used for taking care of environmental effects of the operations of Sainsbury’s.
Place – Sainsbury’s operates more than 714 convenience stores and around 598 supermarkets in the United Kingdom. The operations of 45 around 45 stores of Sainsbury’s continue 24*7 and the rest operate till the middle of the night on Fridays. The organization also offers home delivery of the different products manufactured and offered by them to the consumers. The orders of the products are placed online with the help of the website of the company or with the help of a phone call (Gaur, Kumar and Singh 2014). The distribution of Sainsbury’s was handled by the organization initially however, after an issue faced by the company in the year 1970, the company changed its distribution based network. The organization owns more than 13 regional centres of distribution and 2 national distribution centres. Sainsbury’s can implement the distribution process that is already operating in the United Kingdom. However, the company needs to analyse the situation in the country and then associate its operations with the local distributors of China. The operations of Sainsbury’s will thereby be able to affect the industrial condition of China in a positive manner (Zander, McDougall-Covin and Rose 2015).
Price – The pricing strategy that has been implemented by Sainsbury’s is related to the maximum value that needs to be provided to the consumers. The products of the company have been able to provide the maximum value for money to their consumers. The policy of competitive pricing is used by Sainsbury’s to compete with the other retail organizations in the market of United Kingdom. The quality of services and products are maintained by the organization and the services are provided at the best of the capabilities of Sainsbury’s. The high quality of products and services provided to the consumers have helped the company to build a loyal customer base. The policy of Price discrimination is used by Sainsbury’s according to the positioning of the products in the market (Eckman et al. 2015). The company thereby obtains premium prices for the products that hold the premium position in the market. The products that belong to the basic or kids range of the organization are priced at the lower levels and further excellent quality to the customers. The pricing strategy that is a part of the marketing mix of Sainsbury’s covers all the prices that are decided for the different products. The pricing strategy that is used by Sainsbury’s in the United Kingdom can be implemented in the Chinese market as well. The process of competitive pricing will the most effective policy in the Chinese retail market as the competition levels in the industry are high (Dinu 2016).
Political Factors
Promotion – Sainsbury’s has been effectively using the above the line and below the line strategies related to the promotion of various products under its brand name. The company has been using celebrities for the purpose of promoting its products in the market. The above the line advertisements methods that are used by Sainsbury’s in the United Kingdom include, radio, television for the purpose of communicating the corporate image of the brand in the market. The below the line strategies that used by Sainsbury’s for promotional purposes include, sales promotion, packaging and database marketing. The “live for less” slogan has been recently used by Sainsbury’s for the promotional campaigns of the company. The organization has been able to increase the sales and the revenues and further build the loyalty of the consumers (Dorobantu and Zelner 2014). The “Nectar reward card” offered by Sainsbury’s has helped the consumers to earn points on different purchases that are made at the stores. The points can be further redeemed on the next purchase made by the consumers in Sainsbury’s. The customer database of Sainsbury’s has also been maintained with the help of these loyalty cards and points provided by the organization. This will be helpful in promoting the image of Sainsbury’s related to environmental responsibilities and the community services operated by the organization. Sainsbury’s can implement the promotional strategies that are similar to those used by the company in the United Kingdom. The positive image of the company can be helpful for its expansion in the Chinese retail industry (Bamiatzi et al. 2016). The different above the line and below the line strategies that have been used by Sainsbury’s in the United Kingdom can be used successfully in the retail market of China. The different strategies that will be applicable for the operations of Sainsbury’s in China are based on the usage television, radio, sales promotion and the marketing activities based on the database of the customers. The usage of digital media can be added to the strategies that can be used for the promotion of the products in the Chinese retail industry. This will be helpful for Sainsbury’s to enter the Chinese retail market and maintain its operations in a profitable manner.
The marketing mix of the companies need to be changed based on the external environment of the country where they are planning to expand its operations. Sainsbury’s has been a successful organization in the United Kingdom and the marketing mix of the company has also been quite effective in nature. The expansion of Sainsbury’s in China thereby requires some minor changes in the marketing mix of the company. This will help in the successful operations of the organization in the Chinese retail industry (Dimitrova, Rosenbloom and Andras 2017).
Economic Factors
The theory related to cognitive dissonance deals with the study of the behaviour of people and this has been a subject of the interest of social psychologists. According to Leon Festinger, the people hold many cognitions in the course of their daily lives. Many of the cognitions that are held by people are irrelevant to each other and they are not problematic for individuals. The cognitions that are faced by people are complementary and in consonance with each other. The individuals tend to repeat and maintain the behaviour towards a certain situation if the cognitions support the behaviour and the attitude of the individuals. On the other hand, the lack of support from the cognitions are against the repetition of the behaviour of consumers in a certain situation (Bamiatzi et al. 2016).
The cognition of the consumers of Sainsbury’s affect the ways by which they behave towards the products that are offered to the consumers. The organization thereby needs to create a positive effect related to the products that are offered by Sainsbury’s to the consumers. The lack of cognitive dissonance can further increase the chances of the positive attitude of the consumers towards the products. For example – the marketers can try to influence the belief of the consumers related to the value of the products that are offered to them (Dorobantu and Zelner 2014). The benefits of the organic products that are offered by Sainsbury’s are based on the belief of the consumers. The company can thereby aim to match the belief that they have regarding the effects of the organic products on their health. In this manner, the company will be able to create a sustainable position in the market with the help of the highly valued products that are offered to the consumers (Sainsburys.co.uk. 2018). The Chinese consumers are quite health conscious in nature and select the brands according to the value that they provide to their health. The marketers can thereby successfully create a different position for Sainsbury’s in the market.
Conclusion
The essay can be concluded by stating that Sainsbury’s can appropriately plan for its expansion in the Chinese retail industry with the help of the wide range of products that it offers to the consumers. The expansion will further provide benefits and profits to the company and further be able to improve the retail sector of China. The growing economy of the country will be the major source of benefits that will be provided to the operations of Sainsbury’s in China. This will further mark the entry of the organization in Asia which will increase its international presence as Asia is a booming industry and will help in the future growth of the company.
Social Conditions
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